In recent times, much discussion has occurred around the question of how significantly Google endeavours could impact on the insurance industry, both locally and abroad.
Google has already ventured into the comparison website market overseas. How likely is it that they’ll introduce a similar site in Australia? And what other plays could they make in the insurance space?
Google launched its first car insurance comparison site, Google Compare, in the UK in September 2012 after it bought existing site BeatThatQuote.com for £37.7m (A$75.18m).
“That certainly took industry participants by surprise,” says Scott Guse, an audit partner for KPMG
Australia in the insurance field. “They certainly weren’t expecting the likes of Google to actually start their own comparison website.” In March 2015, the launch of Google Compare Auto Insurance in the US state of California was announced, and given its earlier forays into comparison sites and the well-publicised driverless car project, that announcement was far more widely anticipated. Shortly thereafter, it was revealed the technology giant had partnered with Compare.com, an already-established car insurance comparison site that offers quotes to customers in 49 of 51 US markets.
The partnership gives Google Compare users the benefit of an increased number of quotes as a result of the relationships Compare.com has with a large number of insurance companies.
Andrew Rose, CEO of Compare.com, spoke to Insurance Business about the partnership with Google. On how it came about, Rose tells us: “As Google bought BeatThatQuote.com in the UK … we made it known to them that, should they ever want to come to the US, we’d be interested in having conversations about synergies that might exist, and that conversation ultimately led to the relationship that exists today.”
Only two months after announcing its California site, Google Compare announced its expansion into Texas, Illinois and Pennsylvania. It’s said they’re currently licensed to sell car insurance in 26 US states. How quickly they’ll move right across the country remains to be seen. But Guse says, “Google doesn’t do anything by halves. If they make a decision, they will go into it and make the most of it.
“It won’t take them long to expand across the whole of the US and then up into Canada. And then I would’ve thought the next step would be some of the European markets, which are ripe for comparison websites.”
In considering the likelihood of Google Compare establishing an Australian presence in the near future, Guse highlights the differing levels of success that comparison websites have experienced in the UK and Australia. “Google obviously started up in the UK because the comparison websites over there are all the rage,” he says. “That’s how a very large percentage of insurance is sold in the UK market.
“That is not the case in Australia. The major insurance companies – Suncorp
– have not allowed their products to be sold on comparison websites, and I cannot see that changing in the foreseeable future. As long as the majors hold their ground, I personally don’t see Google being a company that would race here to set up operations. I think there are much more powerful markets for them to explore and expand into before… Australia.”
Rick Shaw, actuaries and consultants insurance partner at Deloitte
Australia, agrees that insurance comparison websites haven’t fared as well in Australia as in other markets because of the lack of larger player participation. “That entrée into the market, which I think is the most suitable for Google, is not really available in the Australian market,” he says.
But comparison websites are far from the end of the story. Speculation is rife about other conceivable entry points into the insurance market for Google. Shaw comments on the potential value of Google’s data to insurance companies. “Insurance is … a business where you sell the product before you know what it’s going to cost. And data is very much king in insurance, because there are two basic ways of making money in insurance… having lower expenses, or picking better risks. And data is a key to picking better risks … Smart data will enable Google to pinpoint exactly what is a good risk and what isn’t.”
So perhaps it’s Google’s ability to sell its data to existing industry players, allowing it to be harnessed as a method of better pricing risk, which represents the company’s real goldmine in insurance.
Don Johnstone, a director of Deloitte
Australia, thinks that even within the comparison space, Google may look at other opportunities.
“Google could also be an aggregator for the claims management of insurance. So if you get a claim, you then can go to an aggregator site and shop around for a repair shop to ﬁ x your car. There are all sorts of innovative possibilities.” Johnstone adds: “The whole insurance value chain is more unbundled in the UK than it is in Australia. So there’s a lot of scope for the industry Source: ASIC
– Insuring your home: Consumers’ experiences buying home insurance to transform and for players to disintermediate parts of what the big players dominate at the moment. The claims side is a key part.”
Guse looks to recent activity of the Alibaba Group, a Chinese e-commerce company, as an example of another move Google could make. “Only about six months ago, [Alibaba] started to take strategic stakes in some local insurance companies in China,” he explains. But he adds that they “haven’t publicly come out and said what their intention is”.
He also cites a development in the Netherlands. “In 2013, a company called Aegon launched a new product called Kroodle, and the only place that you can buy Kroodle insurance is through Facebook … If that’s successful, without a doubt, you could start to see Facebook trying to leverage that model and roll that out around the globe.”
And in addition to the above-mentioned players, there’s a great deal of conversation around the impact of any decision by online distribution giant Amazon to seriously pursue an insurance sales route.
Time will tell whether Google will manifest in the insurance industry in Australia, be it in the guise of Google Compare or exploiting another kind of opportunity. But as Andrew Rose wisely advises, “watching what’s happening across the oceans is not a bad thing”.